Question

Company Alpha has a total of 50 million to invest. List of all projects is as follows.

   Net Investment($million) , Present value of NCFs

Project A    10 , 11

Project B    12 , 18

Project C    18 , 23

Project D    16 , 20

Project E 19 , 27

Determine which projects should be taken

~ B, C, and D

~ A, C, and E

~B, C, and E

~A, C, and D

Answer 1

Solution : To select which project to be select we need to calculate NPV .The combination of the project with highest NPV will be selected.

Below is the table showing NPV ( Investment - Present value of NCF'S)

Project	Investment($ million)	Present value of NCF'S	NPV	Rank
A	10	11	1	5
B	12	18	6	2
C	18	23	5	3
D	16	20	4	4
E	19	27	8	1

Therefore Project B ,C and E should be undertaken because this combination provides highest NPV.

Total Amount Available = $ 50 million

Amount invested in B,C and E =12 + 18 + 19 = 49 million.

Therefore these projects can be undertaken.

Therefore Project B ,C and E should be undertaken